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Phenix Corporation reports following information regarding its sales and cost of sales. Draw the estimated line of cost behavior by using the scatter diagram, and evaluate fixed costs and variable costs per unit sold. Then use the high-low method to estimate the fixed and variable components of the cost of sales.
Period Units Sold Cost of Sales Period Units Sold Cost of Sales1 0 $2,500 6 2,000 5,5002 400 3,100 7 2,400 6,1003 800 3,700 8 2,800 6,7004 1,200 4,300 9 3,200 7,3005 1,600 4,900 10 3,600 7,900
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How would a knowledge of cost behavior patterns such as those above be of help to a manager in analyzing the cost structure of his or her company?
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